Litigation Funding Reform Remains Our Intention, Minister Tells MPs

Why It Matters

Reversing PACCAR and modernising litigation funding are critical to restoring market certainty and ensuring access to justice for claimants and law firms. The government’s stance signals potential structural changes that could reshape the UK legal services landscape.

Key Takeaways

• Government still aims to reverse PACCAR ruling despite legislative delay
• Delay may enable broader, holistic litigation‑funding reform
• MoJ plans new regulatory framework for funders; details pending
• ILCA scheme design and operator model remain undecided
• AI‑driven legal tools identified as future regulatory focus

Pulse Analysis

The Supreme Court’s PACCAR decision in 2023 sent shockwaves through the UK litigation‑funding market, casting doubt on the enforceability of third‑party finance agreements. Law firms and funders argued that the ruling threatened the viability of many high‑value claims, prompting the government to promise legislative reversal. Although the proposed bill was absent from the King’s Speech, Justice Minister Sarah Sackman emphasized that the delay is not a retreat but a strategic pause, allowing policymakers to consider a more comprehensive overhaul of funding rules.

Beyond the PACCAR fix, the Ministry of Justice is eyeing a sweeping reform agenda. A new regulatory framework for litigation funders is slated for introduction, though specifics remain under wraps. Parallel to this, the ILCA consultation—aimed at allowing interest to accrue on client accounts—has closed, with the government weighing whether an independent foundation or a MoJ‑run model best serves access‑to‑justice goals. These initiatives reflect a broader intent to bolster the financial underpinnings of the justice system, ensuring that claimants can secure representation without prohibitive costs.

The conversation also turned to technology, as AI‑driven legal tools were flagged as an emerging risk area. While not yet covered by the Legal Services Act, regulators are monitoring AI’s impact on consumer protection and professional standards. Minister Sackman signalled openness to future regulatory inclusion, hinting at a possible review of the Legal Services Board’s remit. Coupled with discussions on a national legal service or unified badging system, these signals suggest a holistic re‑examination of how the UK delivers legal aid and modernises its justice infrastructure.